Mortgage rates hit a historical low in 2020, prompting homebuyers to get a new or additional home and homeowners to refinance their homes to lower their interest rates. This phenomenon was brought about by the steady increase in mortgage-backed securities that pushed rates lower than the average. However, it won't last forever. In fact, despite the market being hot, interest rates have grown since 2020 and will continue to do so (albeit at a slow pace, but growing nonetheless). 

According to the OC Register, mortgage rates are expected to get to an average of 3.5% by the end of 2021 and increase to 3.9% by the end of 2022. This means that the best time to refinance is as soon as you can — but how soon is that?

Here are the best reasons to refinance your mortgage, how soon you can expect to be able to, and the importance of comparing your options.

Reasons to Refinance Your Mortgage

Despite being hit by the pandemic, Freddie Mac's research has shown that mortgage refinancing is continuing to climb, with activity reaching its highest yearly total since 2003. "There were an estimated $772 billion in single-family first lien refinances in the last quarter of the year 2020," the research company reports. "For full-year 2020, there were about $2.6 trillion in refinance originations (adjusted for inflation), more than double the volume in the year before."

This is important because there is a reason so many people are still taking advantage of refinancing opportunities. To name a few, you may want to refinance for the following reasons:

  • Lower your mortgage's interest rate.
  • Consolidate your debts and get cashback through refinancing (mortgage rates are much lower than other loan types).
  • Get money back to increase home value (i.e., upgrades, repairs, replacements, additions, etc.).
  • Switch from an adjustable mortgage rate to lock in a lower fixed rate.

On the other hand, you should not consider refinancing simply to splurge on nice things as there are some drawbacks to consider, like long-term savings being less significant than short-term savings (by extending loan term) and covering new loan closing costs before making a dent on the new loan.

How Soon You Can Refinance Depends on Your Lenders

There are a couple of factors to consider when determining how soon you can refinance your mortgage loan. This is because it often varies from company to company, and whether you change lenders makes a significant difference. 

How soon can you refinance with your current lender

When refinancing your mortgage loan with your current lender, it is expected that you wait at least 6 months before you refinance with your original loan's lender. This is because there isn't any real benefit to do so otherwise. You can however, choose not to wait if you decide to refinance your mortgage with a new lender.

Refinancing with a new lender

Refinancing with a new lender typically gives you the option to make the switch whenever you see fit. However, it's still important that you weigh the pros and cons of refinancing, especially if you plan on doing it so soon after requiring your original loan. It's more common and even beneficial to refinance years (sometimes recommended at 5 or more) after acquiring the original loan. If you are thinking about refinancing either with your current lender or a new one, be sure to check out our complete refinance checklist here to make sure you have everything ready to go.

Refinancing with different mortgage loans 

When determining how long you have until you can refinance your mortgage loan, you also have to consider the type of loan you're refinancing and how long it has been since the original loan was put into place.

For instance, the following loans have different rules to follow in terms of how long until you can refinance:

  • USDA loans — the U.S. Department of Agriculture offers these loans to rural residents through direct loans or guaranteed loans. Direct loans don't have a waiting period before you can refinance(so whenever you want to!), while guaranteed loans require you to wait at least a year after obtaining the loan to refinance. 
  • VA loans — these loans are offered by the Department of Veteran Affairs and are only provided to eligible parties who meet their requirements. To refinance after acquiring this loan, you must've paid more than 6 months of payments or wait 210 days (whichever is the longest). 
  • Conventional loans — these loans are among the most common and often take no time to make the switch and refinance. However, you'll likely have to wait 6 months or more if you're interested in refinancing with the same lender as your original loan. 
  • FHA loans — these loans are offered by the Federal Housing Administration and differ depending on the FHA refinancing loan type you're interested in.
    • Cash-out refinance requires 12 months of on-time, monthly payments.
    • Streamline refinance requires that your loan is up-to-date, has had at least 6 monthly payments, and a minimum of 210 days before you apply for the option.
    • Simple (or rate-and-term) refinancing requires that you wait at least 7 months, about 6 months of payments. Those 6 payments must've been on time, and you can only have 1 late payment in the past year on your record.
  • Jumbo loans — jumbo loans are for refinancing properties that are too expensive for conventional loans. Although these loans are typically stricter in rules than conventional loans, they also do not require any kind of wait time or a number of payments to be had before securing a refinanced loan (so again, you can refinance whenever you want!).

Compare Refi Rates

The market is hot right now, making it likely that you'll find some incredible deals you only have a limited time to lock in. With that being said, it is still extremely important that you weigh your options and compare mortgage rates before making your decision. This ensures you're getting the best possible deal that fits you and your mortgage needs, as it's typically recommended refinancing if you find the opportunity to lower your interest by at least 2% (although 1% is still reason enough to refinance).

Take charge and make sure you're getting the most out of this unbelievable market by comparing mortgage rates with the form above to find which one suits you best.

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The responses below are not provided, commissioned, reviewed, approved, or otherwise endorsed by any financial entity or advertiser. It is not the advertiser’s responsibility to ensure all posts and/or questions are answered.

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